The cost of renting flats surges 7% to all-time high as young are priced out of buying

The cost of renting for flats has reached an all-time high, according to an index by Findaproperty.com.

The property listings website said letting costs had risen overall in the first quarter of 2012 - the first rise since last summer.

The average asking price for renting
in the UK is now £868 per month – 1 per cent up on the same time last year, but below
the record high of £890 in September 2011.

Financial pinch: Rents have been rising fast for flats

But its tenants in smaller homes that are bearing the brunt of the worst rises.

Rental asking prices for studio flats have increased by nearly 7 per cent in the past year reaching an average £718 a month while one-bedroom flats increased by 2.5 per cent to £660 - also a new record.

It comes as yet another financial blow to younger Britons. Rents have soared during the financial crisis - largely a result of stricter lending rules making it harder for aspiring buyers to get a foot on the property ladder.

Findaproperty's rental index

Meanwhile, the spending power of Britons has been squeezed by the fast-rising cost of goods. The Consumer Prices Index peaked at 5.2 per cent last year and has since stubbornly remained above its target of 2 per cent.

Research by Findaproperty suggested that tenants are now spending an average 38 per cent of the typical £27,000 take-home salary on rent - but the figure soars to 71 per cent for London.

The study suggests the average rental property in the capital - at £25,800 - gobbles up a vast amount of the typical salary, at £36,384.

A recovery in house prices in London and
the South-East has put the property-owing dream beyond the reach of
millions. Experts say the bounce back has been driven by a range of
factors including an influx of foreign buyers, the Bank of England's
efforts to hold down borrowing costs and a recovery in bonuses in
London's financial sector.

London's buy-to-let market is expected to come under pressure as the Government-imposed cap on benefits forces some council tenants out of the capital.

'Smaller homes remain in limited supply and as a
result, individuals and couples are still facing record asking prices for
smaller flats and therefore spending a significant proportion of their overall
household income on this,' said Samantha Baden, a property analyst at Findaproperty.

'This is particularly pertinent in areas like London
where demand is high, which is why tenants looking for more affordable rental
property should consider the impact of location as well as size.'